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Individual Development Accounts:

An Endangered Wealth-Creation Strategy?

The introduction of the Individual Development Account (IDA) in 1996 opened the door
to a new school of thought on ending the cycle of poverty. This innovative tool challenged
traditional means of support by asking the question, What if we can do more good for more
people by helping them actively save and build assets than by simply offering cash
assistance? Since then, IDAs have become wildly popular among low-income individuals
and families. But can funding keep pace with demand?



4th District Profile


In My Opinion

Compliance Corner

Reader’s Survey

Canton, Ohio:
Home to One of the Nation’s
Leading IDA Programs

Overcoming Funding

IDAs and CRA

Tell us what you






he idea was straight-

forward: Strengthen the
economic stability of low-




income individuals, families,
and communities by offering
them incentives to save for lifechanging assets – namely

“Similar to 401(k)s, IDAs help low-income
families build the financial assets —
homes, businesses, education — that they
need to achieve the American dream.
Small investments in matched savings
and personal finance education can yield
big returns for families, financial
institutions, communities, and the nation.”

homeownership, small business

- Corporation for Enterprise Development (CFED)

start-up, or post-secondary
education. Their deposits into
Individual Development
Accounts (IDAs) would be
matched by private and/or

dollar amount specified on a
program-by-program basis.
Add to the mix financial
literacy education and training,
and clearly, the IDA concept
held great potential.

Private and Public Support
Foundation-funded commu-

efforts include the following:
• The Personal Responsibility
and Work Opportunity
Reconciliation Act of 1996
• The Assets for Independence
Act of 1998
• The establishment of an
IDA program for refugees
by the Office of Refugee

communities, with the hope

Columbia have passed laws

that their outward display of

to support IDAs (34 actually

• The Savings for Working

support would leverage

have programs in place), and

Families Act (SWFA)

significant public funding.

legislation has been introduced

public funding at a rate of
1:1 to 7:1, to a maximum

to support IDAs. Notable federal

Typically a bit more

in most of the remaining states.


Additionally, the Affordable

cautious, policymakers waited

State policies have helped to

Housing Program (AHP) of

to see if low-income people

create funding streams for IDAs

the Federal Home Loan Banks,

could and would actually save.

and generate federal support.

Bank Enterprise Awards of

It didn’t take long for them to
see that the answer was a
resounding yes. IDA partici-

the Community Development


n the federal level,

Financial Institutions (CDFI)
Fund, Family Self-Sufficiency

pants were plentiful, as they

a number of IDA proposals

Program, HOME Investment

welcomed the new opportunity

have been considered over the

Partnership Program, U.S.

for building wealth. Today,

past eight years, and a variety

Treasury Electronic Trans-

29 states and the District of

of programs have been initiated

action Accounts, IDA VISTA

nity organizations enthusiastically embraced the IDA
concept. They committed
funding, manpower, and
creative resources to the
development and implementation of IDA programs in their

“We know we must bring to the table a high level of support
in terms of offering strong savings products to IDA accountholders,
providing quality
and reporting responsibly
to our nonprofit partners.”
- James Matthews
Senior Vice President
Corporate Community Reinvestment Manager
National City

Special thanks to the Corporation
for Enterprise Development
(CFED), as well as to the following individuals, for generously
sharing information and insights
into IDA programs and policies
for this issue:

George Barany
Executive Director
WECO Fund, Inc.
Ray Boshara
Director, Asset Building Program
New America Foundation

Inger Giuffrida
Assets Alliance
Monica Graves
Assistant Vice President
and CRA Officer
Unizan Bank
Inna Kinney
Executive Director
Economic Community
Development Institute
James Matthews
Senior Vice President
Corporate Community
Reinvestment Manager
National City
Jay Murdock
Executive Director
Stark County Out of Poverty Partnership
Kim Pate
Director of Field Development
Corporation for Enterprise Development

nancial institutions, financial

support IDAs in various ways.

services firms, community

Financial Services Partners

development financial insti-

In addition to holding the

tutions, foundations, and

potential to be generous inves-

philanthropic organizations

tors in IDA programs, financial

continue to make socially

institutions play a pivotal role

responsive investments into this

in providing account manage-

asset-building effort,” says

ment services. But they are

Kim Pate, director of field

careful in choosing their IDA

development for CFED. “How-

partners. They want to be

ever, adding to this funding

sure they are associated with

terms of offering strong savings

base requires demonstration

programs that succeed in

products to IDA accountholders,

of the incentives for becoming

helping their clients achieve

providing quality service, and

involved. For example,

their homeownership, educa-

reporting responsibly to our

supporting IDAs provides an

nonprofit partners.”

opportunity for positive public

tion, or small business goals.

relations: Those who back


The Outlook for IDAs

these programs can enhance

ames Matthews, senior

Despite their growing popular-

their activities in low-income

vice president and corporate

ity – more than 500 programs

communities and develop

community reinvestment man-

nationwide are supporting

partnerships with other stake-

ager for National City, explains

20,000 active accountholders,

holders. These investors may

what his bank seeks in an

according to the Corporation

also receive recognition for

IDA partner: “We look at the

for Enterprise Development

their efforts from the Commu-

strength and capacity of the

(CFED) – and the initial surge

nity Reinvestment Act (CRA)

provider organization. Do they

of support IDAs enjoyed,

and other community develop-

have the capacity to deliver the

private and public support is

ment programs.” (For more

program? Has their program

beginning to wane. Nonprofits

information on the benefits to

actually helped people change

are finding it increasingly

investors, see In My Opinion,

their behavior, and is that

difficult to locate match dollars

pages 6-7.)

change demonstrated through

as well as operating funds.

monthly saving habits?”
Matthews, who is based in
Pittsburgh, has been involved
in the IDA effort since its
inception. He points out that
it is equally important for the
partner financial institution
to have solid credentials. “We
know we must bring to the
table a high level of support in



Darrick Dansby
Executive Director

any private fi-

America), and other programs


Ann Bailey
Executive Director
Action Housing


(Volunteers in Service to


4th district

Canton, Ohio:
Home to One of the Nation’s Leading IDA Programs





“Typically, society spends
about $20,000 a year to
maintain a family in poverty
in government welfare-type
programs. Our organization
spends $4,000 to move a
family beyond income
maintenance programs to
build wealth and get out
of poverty.”
Jay Murdock

Executive Director
Stark County Out of Poverty Partnership

Jay Murdock’s inspiration about
Individual Development Accounts
(IDAs) came one morning in 1995
while he was watching TV. The show
was a housing conference sponsored
by former U.S. Housing and Urban
Development Director Jack Kemp.
Cicero Wilson of the Corporation
for Enterprise Development (the
national IDA association) described
how IDAs could help low-income
families build wealth.
Murdock, then the housing
director for the Stark County Out of
Poverty Partnership (SCOPP), was
immediately sold. He saw IDAs as a
way to augment the organization’s
Family Development Program,
which lacked a financial services
“We were helping families
overcome social barriers but not
financial ones,” Murdock recalls.
“After Cicero Wilson spoke, I knew
that our organization needed to
create an IDA program to help
families overcome income and credit
issues.” In 1999, the program was
launched with local support from
Unizan Bank. Now, Murdock is the
organization’s executive director.

Family Development Program
SCOPP, formed in 1991, created its
IDA program as a way to serve the
needs of low- and moderate-income
families in the city of Canton and
Stark County, Ohio. Called the Family
Development Program, the IDA offers
a way to increase savings and
investments for low-income families.
This program couples economic
literacy training with a financial
incentive to save for the acquisition
of an asset.
Program participants learn about
budgeting, savings and investments,
banking and credit. While they
receive this training, they also save
for one of the following life goals: a
down payment on a home, establishment of a small business, or college
education. For every $1 they save,
SCOPP provides $4 in matching
funds – one of the highest matches
in the nation.
Match funds for the IDA come
from the U.S. Department of Health
and Human Services and local
foundations. While SCOPP has longstanding relationships with many
lenders in town, Unizan Bank plays
the most prominent role. Since day



“My business has changed
my life because I’m in a
position to meet new people
and control my own destiny.

one, Unizan Bank (formerly United
National Bank) has held the accounts
and provided operating support.
“I think it’s an excellent program,”
explains Monica Graves, assistant
vice president and CRA officer for
Unizan Bank. “SCOPP and its board
of directors believe in the assetbased theory prescribed by Brian
Grossman, Robert Friedman, and
Puchka Sahay that couples financial
literacy programs with monetary
rewards to break the cycle of
generational poverty. Jay Murdock
and [Program Manager] Sharon
Nunn-Alexander have done a great
job.” As a result, Unizan recently
received the CRA and Fair Lending
Colloquium’s annual Community
Impact Award for its work with
Success Stories
Currently, 46 people are enrolled in
the SCOPP’s Family Development
Program at different levels of participation. Another 15 are coming on
line. While homeownership is a goal,
the participant’s IDA funds can also
be used to start a business or go to

of satisfaction.”
Sherry Morgan

Owner of Quick Cupid

school. Most importantly, SCOPP’s
IDA program gives people a new
outlook on life.
The program’s manager, Sharon
Nunn-Alexander, is a stalwart
champion of the Family Development
Program, not only because she is
the administrator but also because
she successfully participated in the
program herself.
“I benefited from SCOPP’s Family
Development IDA Program as a
result of my enrollment in 1999,”
Nunn-Alexander explains. She faithfully saved a portion of her earned
income to invest in the IDA’s match
account so she could put a down
payment on her first house. Soon
after, Murdock hired her to run the
program. “I feel that my story is a
testimony of what this program can
do to change other people’s lives
as it did mine,” Nunn-Alexander

remarks. Murdock adds: “We’re very
proud of our graduates.”
Thomas Williams enrolled in the
SCOPP’s IDA program to start his
own entertainment business, Finesse
Entertainment. But that wasn’t his
only motivation. After 25 years of
working nights and weekends on
video and sound production for a
television station, Williams decided
it was time to go solo. “Now, I can
freelance from home and spend
more time with my children,” says
the proud father of a 16-year-old
son and 15-year-old daughter.
Sherry Morgan used SCOPP’s
IDA program not only to purchase
her first house but also to start her
own “speed dating” service, called
Quick Cupid. “I give singles an
opportunity to get together and let
God do the rest,” she says. “A few
people are already getting married.”


It gives me a great sense
Morgan used some of her funds
from her IDA to buy Web site rights,
computer equipment and office
supplies. Since May, Quick Cupid
has prospered. “My business has
changed my life because I’m in a
position to meet new people and
control my own destiny,” Morgan
testifies. “It gives me a great sense
of satisfaction.”
Murdock views the IDA program
as a good return on investment.
“Typically, society spends about
$20,000 a year to maintain a family
in poverty in government welfaretype programs,” he explains. “Our
organization spends $4,000 to move
a family beyond income maintenance
programs to build wealth and get
out of poverty. That’s a better investment of resources than government
poverty programs.”
What does success look like for
SCOPP? According to Murdock,
“Success would be to continue to
see families purchase leverageable
assets – businesses, homes, education – and move toward economic
independence. As an organization,
we would like to expand upon what
we are currently doing and have
the staff capacity to do it.”


in my





Overcoming Funding Challenges
Financial Educator/Asset-Building Strategies Consultant
Director of the Assets Alliance

In the past couple of years, practitioner organizations have been struggling to
secure adequate funding for Individual Development Account (IDA) initiatives.
In the 1990s, IDA programs had the benefit of being a new strategy for wealth
creation for the poor. Today, as more than 20,000 Americans have participated
in IDA programs, this strategy is no longer viewed as innovative or cutting edge
among many institutions and individuals with the resources to provide financial
backing. State and federal budget cuts add to the funding challenge.
Evaluation data indicate that IDAs
do work, however. People who had
never had relationships with financial
institutions now hold accounts.
People for whom budgeting was a
foreign concept have completed
financial literacy courses. People who
thought they could only dream of
owning a home, starting a business,
or getting education to start a new
profession have realized their highest
ambitions. Yet thousands of lowincome families still have not been
reached by IDA programs. The
potential market and the potential
for long-term positive effects far
exceed the supply of opportunity.
Many prospective funders balk
at some of the expenses associated
with IDA programs. In addition to
the costs of managing a matched
savings account are those associated


with recruiting, assessing, enrolling,
educating, and supporting accountholders. In this funding environment,
demonstrating and communicating
results – the social, psychological,
and economic benefits resulting
from IDA programs for individuals,
families, and communities – become
critical to generating financial
Organizations should consider
the following five strategies to
ensure that their IDA programs are
adequately resourced:


Reduce Program Costs
Link with an existing IDA program
that has a cost-effective administrative infrastructure (policies,
procedures, account management,
data collection) in place.

Outsource program components
to organizations that specialize
in key areas: financial education,
credit counseling, microenterprise
development training and technical
assistance, educational and career
planning, homebuyer education,
home maintenance education.
Integrate IDA program processes
and components with existing
organizational infrastructure. For
example, if an organization has a
case manager specializing in intake
for agency programs, incorporate
assessment and intake into the
IDA program.
Remunerate and support IDA
program staff adequately to avoid
turnover. Staff turnover leads to
higher attrition and agency costs,
and lower program productivity.

Increase Program Revenue
Identify funding sources interested in
intermediate or corollary outcomes
embedded in IDA program outcomes
– e.g., increased financial literacy
rates, increased homeownership
rates, increased business ownership,
improved credit scores.
Identify and communicate benefits
of investing in an IDA program
specific to each potential funder. For
example, the benefits of supporting
an IDA program for a financial
institution might include reaching
new markets, developing long-term
relationships with new customers,
providing employees with a volunteer


will serve. Some individuals may
be more valuable for influence on
potential funders than as funders
Use statistics and success stories
(if your program is a start-up,
borrow success stories from other
communities) in a variety of media
(newsletters, newspapers, journals,
speeches, public access television,
radio programs) to communicate
the potential of IDA programs.
Promote milestone achievements
of accountholders and the IDA
program through media and special
events. For example, when a group
completes the financial education
course, hold a public graduation
ceremony and invite stakeholders,
opinion leaders, and decision-makers.
Ask service organizations if you
can speak at their meetings. Use
success stories and statistics to
develop a compelling story, and bring
an accountholder to share her/his
story first-hand; distribute brochures,
flyers, bookmarks, fact sheets, or
business cards.
Ensure systems are in place to
follow up with individuals and
organizations that express interest
in the IDA program.

Implement a Relevant External
Communications Strategy
Identify potential stakeholders,
opinion leaders, and decision-makers
in the community your IDA program

Demonstrate Outcome
It is easier and cheaper to keep a
funder than get a new one. Demonstrate that their investments have
produced results — economic,

social, and civic results, as well as
psychological results for accountholders and their families. Set up
systems to collect data to demonstrate attainment of these results.

Link IDAs With Other Assetbuilding Strategies
Asset building has come to connote
a broad array of policies and
initiatives designed to help families
with low income and low wealth
access and maintain financial and
long-term, productive assets. In
addition to IDAs, here are some
strategies commonly associated with
asset building:
• Savings mobilization
• Tax credit access and tax return
preparation with an emphasis on
the Earned Income Tax Credit
• Broad-based financial literacy
• Employer-based asset building
• Small business development
or expansion
• Homeownership
• Human capital development
IDAs can be effectively linked
with any of these strategies, resulting
in a synergy that increases the

efficacy of the IDA program as well
as the other asset-building strategies.
This, however, should be done only
if the additional asset-building
strategies are truly beneficial to the
IDA program’s target markets.
While there are no easy answers
with respect to IDA program
funding, a multi-faceted strategy
that involves more than searching
foundation databases for potential
funders and writing proposals is
necessary to develop new IDA
initiatives or to sustain established
IDA programs.
The Assets Alliance is a membership organization of experienced
professionals from the IDA and
asset-building fields. The organization is dedicated to expanding
the number of individuals and
families participating in IDAs
and asset-building opportunities
by advancing communications
and sharing effective practices,
resources, and tools with the field
and among technical assistance
For more information on
developing effective resource
strategies for an IDA program,
contact Inger Giuffrida at or
visit the Assets Alliance Web


opportunity, and contributing to
the stabilization of the community
through the development of new
homeowners, new business owners,
and a more highly trained workforce.
Start fund-raising efforts locally.
Benefits for funders investing in their
own communities are direct and
Consider community foundations,
corporations with a presence in
the program service area, financial
institutions, service organizations,
faith-based organizations, educational institutions and individuals.
Articulate and demonstrate how
supporting IDAs complements their
missions and priorities for investing.
Use these local sources to
leverage regional, state, and federal
Communicate short-term, intermediate, and long-term program
outcomes to potential funders.
Consider charging participants
fees. Building on the notion that
people value things for which they
pay, programs could charge a
program application fee, fees for
financial education, and fees for
asset-specific training.









IDAs and CRA
While no standard program exists, Individual Development Accounts (IDAs)
generally take the form of deposit accounts designed to help low- and moderateincome individuals or families accumulate savings for a number of purposes.
The accounts are used for generating savings for education or job training, down
payments or closing costs for the purchase of residences, or start-up capital for

Paul E. Kaboth
Assistant Vice President
Federal Reserve Bank of Cleveland

small businesses. The greatest benefit of IDAs to the participant is that once he or
she has successfully funded the IDA, matching funds are added by a public or
private entity. Depending on the nature of an institution’s efforts, its participation
in IDAs may qualify under lending, investment, or service tests for Community
Reinvestment Act (CRA) evaluations.
In evaluating efforts, examiners look at both the level and nature of the
involvement. For example, if an institution’s involvement is, either directly
or indirectly, in the design and implementation of an IDA program, the examiner
will consider such efforts under

Depending on the nature of an institution’s

the service test. The extent of the
services offered, such as retail

efforts, its participation in IDAs may

banking services associated with,

qualify under lending, investment, or service

or financial education offered in

tests for Community Reinvestment Act
(CRA) evaluations.

conjunction with, the accounts
would be considered with other
services offered by the institution.
If an institution matches

participants’ IDA contributions or donates funds to an entity that matches
contributions, the level of contributions would be considered along with other
investments and contributions under the investment test. Clearly, a crucial aspect
of an institution’s involvement with an IDA program would be a strong partnership
with a public or private entity that promotes this developmental opportunity.
While they are a relatively recent development, IDAs offer institutions an
opportunity to expand the portfolio of institutional investments or services offered
as part of CRA. Financial institutions can ill afford to ignore IDAs as a tool for
reaching low- and moderate-income customers as well as underserved areas within
their markets.




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PO BOX 6387
CLEVELAND, OH 44101-1387

tape closed here


Maria J. Thompson, Senior Advisor
& Managing Editor
Dan Holland, Senior Advisor
& Contributor
Emma Petrie, Research Analyst
& Contributor

Ruth Clevenger
Vice President
and Community Affairs Officer
Cassandra McConnell
Community Affairs Manager

Maria J. Thompson
Senior Advisor
Paula Warren
Administrative Assistant

The American Dream Demonstration:
Research Makes the Case for IDAs
The American Dream Demonstration (ADD), organized by CFED in
1997, was a five-year test of IDAs as a social and economic development tool for low-income communities. ADD brought together
13 community-based organizations to design, implement, and
administer IDA initiatives in their communities. Three years later,
the Dream team had established well over 2,000 IDAs. ADD programs
and accountholders became the subjects of ongoing research that
ultimately proved that (1) low-income individuals can save, and (2)
access to an IDA program improves savings and asset accumulation,
particularly in the area of homeownership. (For more information,

every American with a savings
account at birth. Each individwith low-income individuals


ual would begin with $500,


Emma Petrie
Research Analyst

An Endangered Wealth-Creation Strategy?


eligible for an additional $500

rom the standpoint of

America Foundation and

at birth and the opportunity to

public funding, passage of the

author of Individual Develop-

earn matching funds until age

SWFA, which would authorize

ment Accounts and Public

18, at which point the account

a tax credit to investors that

Policies to Build Savings and

would become a Roth IRA,

support IDAs through matching

Assets for the Poor (published

offering opportunities for

Jeff Gatica
Senior Advisor

funds, would certainly get

by Brookings Institution; visit

education, homeownership, and

the ball rolling, but it would

retirement security that the

Candis Smith
Community Affairs Advisor

Boshara, director of the Asset

and look at larger efforts —

Building Program at New

larger, more ambitious policies


only be the start, says Ray

“We need to expand IDAs

and policies that address both
Dan Holland
Senior Advisor
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are not necessarily those of the Federal Reserve
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of the Federal Reserve System.
Materials may be reprinted provided the source
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Ohio 44101-1387.


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Individual Development Accounts:

“Asset owners may
spend less time
cycling on and off
various publicassistance programs
and more time as
wage earners,
consumers, and
productive members
of the state’s
- CFED State Asset
Development Report Card

long- and short-term savings

middle and upper classes have
enjoyed for years.


DAs are the success-

needs of low-income individ-

ful down payment on the

uals and families,” Boshara

broader vision for helping low-

says. “The federal government

income people save and accum-

has structured and subsidized

ulate assets,” Boshara concludes.

savings strategies for the non-

“They have put savings and

poor [such as IRAs and 529

asset-building strategies on

plans]; now it needs to do the

the map. But we also need to

same for the nation’s poor.”

recognize that going forward,

By way of example, Boshara

we need larger policies that will

cites the Aspire Act (www.

help us get to scale … that will, which would

help end the cycle of poverty

create a structure for providing

and restore hope, confidence,
and economic opportunity to
our nation’s poor.”

of interest
New Markets Tax
Credit: “Making the
January 25, 2005
Cincinnati, Ohio
Federal Reserve Bank of Cleveland
Contact: Candis Smith
Community Affairs Advisor

April 7-8, 2005
The Capital Hilton
Washington, D.C.
Federal Reserve System’s Fourth
Community Affairs Research Conference
Contact: Ruth Clevenger
Vice President and Community
Affairs Officer

Financial Education
Conference &
Consortium Meetings

June 2005
Cleveland, Ohio
Federal Reserve Bank of Cleveland
Contact: Jeffrey Gatica
Senior Advisor

Cleveland, Ohio
Consortium Meetings & Fall 2005
Financial Education Conference
Contact: Maria J. Thompson
Senior Advisor

Fair Lending
Cincinnati, Ohio – proposed: May
Pittsburgh, Pennsylvania –
Investment Test
Lexington, Kentucky – May
Akron/Canton, Ohio – September
Toledo, Ohio – September
Wheeling, West Virginia –
Contact: Candis Smith
Community Affairs Advisor

Details about 2005 planned programs and workshops are posted regularly to the
Community Affairs Office Web page at

Cincinnati & Dayton, Ohio
Consortium Meetings
Contact: Candis Smith
Community Affairs Advisor
Cincinnati Office
Pittsburgh, Pennsylvania
Consortium Meetings
Contact: Dan Holland
Senior Advisor
Pittsburgh Office

CDFI Industry Highlights
The Coalition of Community
Development Financial Institutions
recently released updated snapshots of CDFI industry accomplishments in all 50 states and the
District of Columbia. You can
access the new fact sheets at

P. O . B O X 6 3 8 7


CLEVELAND, OHIO 44101-1387



Promises & Pitfalls:
As Consumer Options
Multiply, Who is Being
Served and At What

2005 Community
Development Policy